Two houses sold in Toronto's Leaside neighbourhood on May 16. Economists expect the real estate market to lose momentum in the second half of the year because of higher borrowing costs.Ammar Bowaihl/The Globe and Mail
The rebound in the Toronto housing market showed signs of easing in June, with sales dipping for the first time in months after the Bank of Canada raised interest rates again, but the shortage of available homes kept buyers’ competition strong and pushed values higher.
Home sales fell by 7 per cent from May to June, after adjusting for seasonal influences, the Toronto Regional Real Estate Board (TRREB) said in a Thursday press release. That marked the first decline in sales since February, when buyers came rushing back to the market after the central bank said it would pause hiking interest rates in January.
But the home price index (HPI), which excludes the highest valued properties, rose 2.5 per cent to $1,163,200 from May to June on a seasonally adjusted basis, according to the TRREB. That was the fourth consecutive month of price increases.
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“The demand for ownership housing is stronger than last year, despite higher borrowing costs,” TRREB president Paul Baron said in the press release. But “home sales were hampered last month by uncertainty surrounding the Bank of Canada’s outlook on inflation and interest rates,” while “a persistent lack of inventory likely sidelined some willing buyers because they couldn’t find a home meeting their needs.”
Most of this year has been characterized by a dearth of homes available for sale. Although more homeowners decided to put their properties on the market last month, new listings were 3 per cent below June, 2022, when activity had stalled because of rising interest rates.
Year-over-year sales last month were up 16.5 per cent and the HPI fell by 1.9 per cent. That is a tiny decline compared with how much value the market lost when the Bank of Canada started its rate hiking campaign in March, 2022. In the Toronto suburbs, home prices had dropped as much as 25 per cent. But prices have been rising quickly in areas such as Halton, Peel, Durham and Simcoe.
“Despite higher borrowing costs, demand remains elevated relative to supply compared to this time last year. Increased competition between buyers has been supporting home prices,” said Jason Mercer, chief market analyst at TRREB.
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Economists are expecting the real estate market to lose momentum in the second half of the year because of higher borrowing costs. The Bank of Canada’s next interest rate announcement is July 12, and that has deterred some buyers, according realtors.
“Talk about another rate hike coming up next week I think just puts a little cloud of uncertainty back into play,” said Scott Ingram, a Toronto-based realtor.
Transactions are still happening, he added, especially for those who managed to get approval for a mortgage rate before the central bank’s move in June.
Meanwhile, in Vancouver, the HPI for June went up 1.3 per cent from May to $1,203,000, according to The Real Estate Board of Greater Vancouver.
The benchmark price for a detached home in Vancouver is $1,991,300, a 1.9-per-cent increase since May. For an apartment, the benchmark price $767,000, up 0.8 per cent month-over-month. For attached homes, the benchmark price is $1,098,900, representing a 1.5-per-cent increase from the previous month.